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22 May, 14:36

A $1,000 bond issued by ABC corporation pays a 6% rate of interest, which resulted in an annual amount of interest of $600.

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  1. 22 May, 14:56
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    This question doesn't show what is required to be done with this statement. However, I would provide explanation below on how to approach it.

    Explanation:

    This type of bond is a coupon-paying bond; meaning, it pays interest to its holders as coupons every year. The coupon rate of 6% can be used to calculate the annual coupon payment in dollars.

    Coupon payment amount = Coupon rate * Face value

    Coupon rate = 6% or 0.06 as a decimal

    Face value = $1,000

    Therefore, Coupon payment amount = 0.06*1000

    Coupon payment amount = $60

    Based on the above calculation, the statement that "annual amount of interest of $600" is incorrect. It should say;

    " ... annual amount of interest of $60."
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